Meanwhile, the seizure by Islamic militants of a gas facility in OPEC country Algeria raised concern that regional turmoil could disrupt energy exports. U.S. gasoline futures also rose after a refinery snag in Venezuela threatened to tighten supplies of the motor fuel in the region.

U.S. crude oilfor February delivery rose $1.25 a barrel to settle at $95.49 a barrel. Brent crude rose $1.42 to settle at $111.10 a barrel. The Brent contract is for March delivery, after February contracts expired on Wednesday.

Data showed that U.S. initial jobless benefit claims fell to the lowest level since January 2008.

Separate data showed that U.S. housing starts jumped last month to the highest level since June 2008.

"Oil prices have risen because of broader economic optimism across the markets, which we've seen reflected in the U.S. jobless claims and housing numbers today," said Matt Smith of Summit Energy in Louisville, Kentucky.

Oil rose alongside U.S. equities as the S&P 500 index firmed by 0.7 percent on Thursday, buoyed in part by a solid U.S. corporate earnings season so far.

U.S. gasoline futures advanced 1.7 percent to $2.7689 per gallon. Venezuela's PDVSA oil company was forced to halt a major unit of the country's 645,000 barrel per day Amuay refinery after a recent fuel-line leak, a worker union representative said. That could force Venezuela to import more fuel.

Twenty-five foreign hostages escaped and six were killed on Thursday as Algeria's military tried to end a standoff with militants at a remote gas project operated by Western oil majors, according to reports.

The attack reinforced concerns about oil and gas supply risks in the region. Norway's Statoil, one of the oil companies involved in the Algerian gas project, said it planned to evacuate all "non-essential" staff from the North African country.

"The market certainly expects that most of the international oil companies will withdraw personnel from oil and gas fields, affecting production," said Christopher Bellew, analyst at oil brokerage Jefferies Bache.

The standoff began when gunmen stormed the gas facility on Wednesday and demanded a halt to a French military operation against fellow al Qaeda-linked Islamist militants in neighboring Mali.

"The incident underscores the danger of militants targeting energy operations in the region," said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut.

Commodity investors also awaited China's GDP numbers due on Friday for more indications of prospects for global oil demand.

The data is expected to show the pace of China's economic growth improved to 7.8 percent in the fourth quarter, according to a Reuters poll, snapping seven straight quarters of slowing expansion.

Oil Hits 4-Month High

The crisis in Algeria is playing a role in oil's big surge today, with CNBC's Sharon Epperson.

Narrowing Spread

Brent's premium to U.S. crude fell on Thursday, dropping under $15 a barrel comparing Brent and U.S. March crude contracts. The spread ended on Wednesday at $16.37 a barrel based on February contract settlements.

The spread has recently narrowed in anticipation that an expanded Seaway pipeline moving crude oil from the U.S. Midwest to the Gulf Coast will ease the glut of crude in the U.S. Midwest - especially at the Cushing, Oklahoma, delivery point for the U.S. oil futures contract.